IISWBM was founded at a time when the concept of management degree was alien to the educational fraternity of that period. The seeds of IISWBM were sown in 1942, when the British government, needing qualified labour officers for its facilities, especially its ordnance factories - the Second World War was on - decided to start a social welfare training institute affiliated to Calcutta University and located close to it. Dijendra Kumar Sanyal was appointed its chief. After Independence, this evolved into the IISWBM, set up in April 1953, with Sanyal as its founder-director. IISWBM was set up in collaboration with the Government of West Bengal, the University of Calcutta and the business community of West Bengal to promote management education. The MBA, MHRM and MPSM courses are autonomous and affiliated to the University of Calcutta; the MBA program has been affiliated to the university for more than 60 years. This institute once served as a mentoring institute for the much-reputed IIM C (Indian Institute of Management, Calcutta) and DoMS IIT(ISM) Dhanbad.

On 5 July 1954, Dr. Bidhan Chandra Roy, chief minister of West Bengal and founder–president of the institute inaugurated the first business management course in India. Dr. Jehangir Gandhy, chairman, All India Board of Technical Studies in Management, Union Ministry of Education, who could not be present at the inaugural ceremony sent a message saying "I am glad that the All India Institute of Social Welfare and Business Management is inaugurating today Business Management Course for the first time in India for the benefit of Junior Business Executives".

The institute celebrated its Golden Jubilee in 2003 and the Government of India released a commemorative stamp of IISWBM for the event.

IISWBM is in College Square where the University of Calcutta, Presidency College, Calcutta Medical College and the All India Institute of Hygiene and Public Health are also located. The School of Tropical Medicine is a distance from the institute site. The institute building has two blocks. The foundation stone of one was laid by Pandit Jawaharlal Nehru, the first prime minister of India and the other by Dr. B. C. Roy, the famous chief minister of West Bengal. Created in response to a strongly felt need of independent India, IISWBM had as its midwives the Ministry of Scientific and Cultural Affairs, Government of India, All India Board of Technical Studies in Management, Ministry of Education, Government of West Bengal, Bengal National Chamber of Commerce and Industry and personalities like Dr A.P.J. Abdul Kalam, Sir Biren Mukherjee, Srimati Renuka Ray, Professor D. K. Sanyal, Lala Lakhsmipat Singhania and many others.